Freelancers, Let’s Talk About Your Taxes

That’s why I’m so excited to introduce you to Brittany Turner. As a CPA and founder of Countless, a modern-day account firm, Brittany knows a thing or two about getting a handle on your taxes. To help, she’s answering your most burning questions about filing taxes as a freelancer.

But, before we get started, let’s get one thing straight: Filing taxes as a freelancer can be nuanced and complicated. While the tips below will offer some general guidance, please consult a professional (like Brittany!) for your own situation.

“How do I know if I need to pay quarterly taxes?”
ICYMI, not every freelancer needs to pay quarterly taxes. So, how are you supposed to know what’s best for you and your business?

“The rule is that if you are going to owe at least $1,000 when you file your taxes at the end of the year, they want you to pay on a quarterly basis,” Brittany explains.

In order to avoid penalties, Brittany says you’re required to send in 100 percent of last year’s taxes or 90 percent of this year’s taxes. And, since your annual goals are often a moving target, it’s usually better to go off of last year’s taxes. However, Brittany wants to make it clear that filing quarterly taxes is very different from the traditional tax season.

“You’re not actually filing a return [each quarter]; you’re literally just sending money,” she explains.

“Okay, how much do I owe?”

Well, it depends. Before you get into the nitty gritty, it’s important to identify your income (the money in your bank account) and net income (the money you have after your business expenses). In order to understand your net income — and how much you really owe — Brittany says it’s important to separate your personal expenses from your business expenses.

“You should have a separate bank account and separate credit card for business stuff,” she says. “Keep the cash separate; separate church and state.”

Though everyone’s tax rates are different, Brittany says most freelancers should generally set aside 30 to 40 percent of their net income. That’s why it’s important to double down on bookkeeping.

“Do the bookkeeping, even if it’s a spreadsheet, even if you just look at the net that’s leftover in your business account at the end of each month,” she says. “Something is better than nothing, but that needs to be the starting point.”

“Got it. So, how do I start saving?”

Let’s face it: When you get a big, impressive paycheck, the last thing you want to do with it is set a big chunk aside for your taxes. However, it’s in your best interest to save $$ on a regular basis.

“What I suggest is to sit down twice a month — on the 15th and on the last day of the month — and have a money date with yourself,” Brittany says. “Look at how much money came into your business during the prior two weeks and transfer a percentage of that (ideally 15 to 25 precent) into a separate account, just for tax savings.”

A big, multi-digit number in your bank account might make you feel good, but you’re in for a rude awakening once you realize a lot of that money belongs to Uncle Sam.

“What if I don’t have enough to pay my quarterly taxes?”

Every freelancer knows the frustration of getting paid months after you’ve submitted your invoice. (If you don’t know, just you wait!) While late payments are annoying on any given day, they can throw a wrench into your tax plans. Don’t worry, it’s not the end of the world.

“Just because you miss the quarterly payment deadline [doesn’t mean] that you can’t send the payment in,” Brittany says. “They will literally take money from you whenever and something in is better than nothing. Even if you can’t make the full quarterly payment that your accountant gave you, send in something as early and as frequently as possible.”

While you shouldn’t make late or partial payments a habit, don’t sweat if that one client still hasn’t processed your invoice. Phew!

“Do I have to do my taxes alone?”

Of course not. You might be your own boss, but you don’t need to battle the tax beast solo. To help, Brittany shared her favorite resources.

Wave: According to Brittany, this free service is an awesome introduction to accounting software. “You can connect your bank and credit card accounts, PayPal, or whatever you use and it’ll pull in the transactions for you,” she says. “All you have to do is classify them. It’s really easy to run reports, and it’ll scale with you.”

Hubdoc: Struggling to keep tabs on your expenses? Get a handle on your receipts with Hubdoc. “I have the app on my phone and I take pictures of receipts on the go, which — you know, lots of apps do that,” Brittany says. “What makes this one different is that it reads the receipts for me and organizes them for me.”

Enlist a Pro: You take a lot of pride in your company, so it’s important to treat your finances as seriously as any other facet of your business. If you want to get your finances in check — and avoid the rookie mistakes you’d likely make on your own — you might want to consider hiring a professional. “I’m into DIY home renovations,” Brittany says. “I enjoy doing [them], but I know that no matter how hard I try, the results just aren’t going to be the same as if I hired a professional.”

A special thanks to Brittany for such an important and inspiring conversation. You can give Brittany some love by following Countless on Instagram and checking out her firm’s services here.

Hustler of the Week: Lyanne Alfaro

Congratulations on Moneda Moves! What inspired you to create this community?

I was inspired to start Moneda Moves because of my experience in business journalism, where I saw a huge opening for making content that critically talks about about Latinos and money. While our experiences are very diverse, we are a force [in] the American economy. I wanted to tell more stories about this. Moneda Moves is my night hustle, however. I also freelance on topics pertaining to women and people of color in business. By day, I am a supervising producer at Nasdaq, working on social media-first content.

What is your favorite part about being your own boss? Least favorite?

With my own time, I enjoy being my own boss because I get to decide what takes editorial priority. It is a privilege to have ownership over storytelling and for people to trust you with their stories to depict them justly. I find that I’m very ambitious in this space and need to pace myself and be patient. None of this is my least favorite, but what is hardest is being patient. You picture your ambitions in your head and the potential of what you’re building, but patience and consistency is key. That’s something I’m learning a thing or two about as I build!

What’s the biggest lesson you’ve learned since launching Moneda Moves?

I’m still learning, but one of my biggest lessons right now is that building strategy can help maintain consistency. If you’re building a brand, there’s so many places you can put your energy. But, at the end of the day, I find burnout is imminent when you’re ambitious but without a strategy. Once you start building a solid strategy, [you can] become more comfortable with pacing yourself and holding yourself accountable, but being patient. The second lesson I learned very quickly is that letting go of perfection will help you take action. So in 2021, I’ve made that my goal: To be a person of action and spend less time deliberating on every fork in the road. Once you have your editorial pillars, it’s also less stressful to make these decisions.

Give Lyanne some love by following Moneda Moves on Instagram and subscribing to her podcast.

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